When it comes to health insurance and medical billing, the list of acronyms to keep track of can feel endless. Luckily, RexPay has made it our mission to help patients get a clear map as they navigate through the sea of financial and healthcare lingo!
What is an FSA?
One of the acronyms that patients often come across is FSA, or Flexible Spending Account. Not to be confused with an HSA, which you can learn more about here. An FSA, similar to an HSA, is an account that you can use to pay for certain out-of-pocket health care expenditures not covered by your insurance (including deductibles, copayments and coinsurance). The big difference is an FSA is on year-by-year basis.
This means the money in your FSA account only lasts for one year. Any money leftover at the end of that year is no longer accessible, so it’s vital that you budget carefully and not contribute more money to the FSA account than you think you’ll need to withdraw for eligible expenses in a particular year.
Typically, an FSA is set up by your employer and the money contributed is not counted as income so you don’t have to pay taxes on the money saved in one as long as it is used for qualified health care costs. It also reduces your out-of-pocket maximum.
Paw tip: For more information on what we mean by “qualified health care costs” check out the IRS guidelines here.
Here are a few differences between an FSA and an HSA:
FSA money expires at the end of the year, but HSA money does not expire.
An FSA is offered with traditional health plans, though an HSA is offered mostly in conjunction with high-deductible health plans.
An FSA can only be set up through an employer, while HSA set-ups are a bit more flexible.
Should you get an FSA?
While budgeting for an FSA can be tricky, they can be incredibly helpful if you have a chronic condition, or if you’re financially planning around a pregnancy! Because such cases have measurable timelines, you can plan your costs ahead of time, and ensure that you use your FSA money before you lose it at the end of the year.
More questions about FSAs and healthcare budgeting? Learn more and pocket some insider tips on the RexPay blog, or download the app today!